best debt ratio for credit score

Here is a detailed post about the Best Debt Ratio For Credit Score. Suppose you are looking for how to calculate debt to credit ratio. Then reading this article may help. It also includes average debt to income ratio in america.

Credit cards can make shopping a breeze. You can go from store to store without carrying cash or accumulating jingling coins. It might seem like these pieces of plastic give you an endless amount of money to spend, but it’s important to remember that credit cards come with credit limits. And how close you come to reaching that limit has an effect on your credit score.

how to calculate debt to credit ratio

Best Debt Ratio For Credit Score

Whether the credit line for your credit card is $2,000 or $10,000, that number wasn’t made up out of thin air. When you applied for the card, your lender likely looked at your financial background and assigned you a credit limit based on your income, your credit score, bankruptcy risk and/or your debt-to-income ratio (how much you’re putting toward paying off debt each month relative to your income).

However it was decided, your credit limit is an important number to know. If you “max out” your credit card this means you spend up to the limit. When this happens, you will likely see the impact on your credit score.

Your credit utilization ratio is the percentage of your available credit that you are using (your credit card debt divided by your credit limit). You might be under the impression that you’re free to spend up to the limit without experiencing any adverse effects. We hear you saying, “My credit card issuer said I can spend up to $6,000. It’s OK if I max out my card this month, making student loan payments or taking care of the mortgage loan on my house…right?” Nope.

Your credit utilization ratio (also known as your debt-to-credit ratio or your balance-to-limit ratio) is one of the factors used to compute your credit score. A higher ratio means a lower credit score.

How Your Debt-to-Credit Ratio Affects Your Credit Score

Your FICO® credit score is made up of five main components and each one carries a specific weight within the total score.

How you’ve dealt with debt and made payments in the past accounts for 35% of your score. The number and amount of new credit accounts you’ve opened as well as the different types of debt you have (credit cards, student loans, auto loans, etc.) combine to make up 10% of your score. The length of your credit history accounts for 15% of your credit score.

Finally, your debt-to-credit ratio and how much debt you carry together account for 30% of your FICO® score. All of this means that you might want to steer clear of your credit limit. It’s best to have as low a credit utilization ratio as possible. In short, a high debt-to-credit ratio can mess up (aka drive down) your credit score.

Note that the FICO® scoring model calculates two different credit use ratios. One is based on your debt-to-credit ratio for each credit card in your wallet. The other adds all of these numbers together to show you how much you’ve spent in total relative to all of your credit lines.

Credit cards in particular matter to the three credit reporting bureaus. Other forms of debt that you might hold don’t have the same impact on your credit score. Since credit cards allow you to carry a revolving balance that you can avoid paying off each month, credit cards carry more weight in the “amounts owed” section of your credit score than do debts from other loans.

How to Calculate Your Debt-to-Credit Ratio

The formula for calculating your credit utilization ratio is pretty straightforward. To figure it out for an individual card, divide your credit card balance by your available credit line. If you’ve only got one credit card and you’ve spent $400 out of a possible $2,000 this month, your debt-to-credit ratio is 20%.

But say you have three credit cards with credit lines of $1,000, $3,500 and $5,000. You can find your overall credit utilization by first adding those numbers. Then, divide your total balance across all three cards by the sum of your credit limits. If you’ve spent $200 on each, your debt-to-credit ratio would be about 6% ($600 divided by $9,500).

What’s the ideal debt-to-credit ratio for credit cards? FICO® suggests that a good debt-to-credit ratio percentage is below 30%. And that goes for your ratio on any one of your cards separately as well as for your overall ratio.

average debt to income ratio in america

Just because you can spend a certain amount with your credit card doesn’t mean that you should. In fact, it’s a good idea to stay well below a 30% debt-to-credit ratio so your credit score doesn’t take a hit that’ll keep you from buying a house or refinancing an existing one. The lower your credit utilization ratio, the better.

BEST SITES LIKE ALIEXPRESS FOR ONLINE SHOPPING

AliExpress is a massively popular Chinese online retail service owned by Alibaba Group. It was launched in 2010 and hasn’t stopped its journey to becoming the ‘biggest online marketplace of the world‘ ever-since. AliExpress stands toe-to-toe even with Amazon in terms of buyers worldwide. It offers wholesale goods at direct-to-consumer prices from Chinese sellers.

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It also works as a great dropshipping model for a lot of e-commerce entrepreneurs. Along with a lot of good sides, AliExpress has some cons as well. The biggest problem is the shipping time of AliExpress orders, which is pretty long considering the goods come from China. Also, some orders can be very expensive after shipping charges and taxes.

So, it is a good thing to have some AliExpress alternatives whenever you don’t like its services. That’s why we are telling you about 21 best sites like AliExpress. Some of these websites offer cheaper prices and faster shipping on certain products. And, you can also use them to maintain a nice profit margin for your dropshipping business.

1. LIGHTINTHEBOX

LightInTheBox is the perfect AliExpress alternative as it is also a Chinese e-Store. It sells hot and trending products across the globe. Their products range from phone and electronics to fashion, jewelry, shoes, bags, and many other items. You can find almost anything here at a very cheap price.

The delivery time of LightInTheBox is also similar to AliExpress as their warehouses are located only in China. But, you may get a faster shipping time due to having fewer orders to ship. You can pay for your orders with PayPal, Western Union, or your credit card.

2. WISH

Wish is a widely popular online marketplace where you can buy almost anything. From clothing to footwear, electronics, healthcare items, and many more things, you can get them all for an incredibly cheap price. They are also known to offer great deals and coupons to their new customers.

Their shipping time is also faster than AliExpress as their products come from sellers located in small countries. Wish also provides an advanced rating system that is very helpful for both the consumers as well as sellers. It helps promote good ones.

3. OVERSTOCK

Overstock is a US-based online marketplace. It makes profit by selling wholesale products at a highly cheap price tag. A major portion of their stock is comprised of overstock from the major retailers or their seconds. You can find some really amusing deals here. The shipping time will also be lower as compared to the Chinese marketplaces. You can get your items within a week.

The product range of Overstock is incredible. You can find everything such as clothing, decor, kitchen appliances, and many more items. You can even find furniture and other big home items. So, you can use to fill your house with great stuff at a reduced price.

4. DEALEXTREME (DX)

DealeXtreme, more popularly known as DX, is an amazing online marketplace. The website works in a very similar manner as ‘Wish’ and sells cheap products coming directly from sellers. It has partnered with many small businesses and sells its products to a wide base of audience.

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The shipping time is a problem with DX also because their warehouses are located in China. Apart from this, you can get some really worthy deals on DX. You should always keep an eye on their clearance sales for the best prices.

5. GEARBEST

Gearbest is the perfect AliExpress alternative if you are looking to shop for the latest gadgets or electronic devices. It works with over 5000 Chinese brands and top suppliers to deliver the best products. It has products from top Chinese companies such as Xiaomi, Huawei, Lenovo, and many others. But, it isn’t just an electronic store.

You can also find a massive range of other products as well. The prices available on GearBest are reduced, and you can even reduce them with the available coupons. They also have warehouses in multiple countries. So, you can get faster shipping from the local warehouse.

6. BANGGOOD

BangGood is another Chinese e-commerce platform that provides worldwide shipping of cheap goods. You can find almost anything on this website, from clothing to electronics, and even home items. The prices available are marked down from their original prices. You can also get amazing deals during special clearance sales.

BangGood provides a free $20 coupon to every new user. The shipping time for BangGood orders is faster than AliExpress for certain products. However, the regular shipping time is similar.

7. CHINABRANDS

ChinaBrands is a widely popular Chinese e-Store where you can buy products at wholesale prices. You can find almost anything on this website at a highly affordable price. Their shipping prices are also low but you will get a long shipping time. It is the perfect website for buyers who want the lowest prices but can wait for their orders for at least a month.

Most of the ChinaBrands sellers run their factories from China, and their warehouses are located there only. This is the reason for the considerably long shipping time.

8. BONANZA

Bonanza is a unique American online marketplace where you can find a great range of products. They have over 20 million items from more than 50,000 sellers. It is a growing e-commerce store where even you can sell your items. It is a preferred platform by more than 20,000 entrepreneurial sellers. You can find some really amazing handcrafted items and collectibles here.

For people looking to shop regular items, this store may disappoint you a little. The prices of some items may be a little higher than some Chinese stores. But, the quality provided will be worth it.

21 ALIEXPRESS ALTERNATIVE STORES

Here are 21 AliExpress Alternatives that you can use to shop online.

  1. LightInTheBox
  2. Wish
  3. Overstock
  4. DealXtreme (DX)
  5. GearBest
  6. BangGood
  7. ChinaBrands
  8. Bonanza
  9. DHGate
  10. TinyDeal
  11. Target
  12. MiniInTheBox
  13. GeekBuying
  14. Jet
  15. TomTop
  16. Target
  17. MadeInChina
  18. American Greenwood
  19. Walmart
  20. eBay
  21. Amazon

FINAL TAKE

AliExpress is amazing but it is always good to have options when you are shopping. So, these are the 21 best sites like AliExpress. If you ever feel like you should look somewhere else, these are some stores that you should visit. You can also use these for your dropshipping business if you are an aspiring entrepreneur. Make sure you have a solid plan before beginning.

In addition to keeping your spending in check, you can also lower your credit utilization ratio by increasing your credit limit. If you haven’t asked for a credit line increase in six months or more and your income hasn’t decreased, your credit card company will likely agree to raise your credit limit. But if increasing your credit limit will just tempt you to spend more, it’s important to be wary of that strategy.

Update: Still have financial questions? We can help. So many people reached out to us looking financial planning help, we started our own matching service to help you find a financial advisor. The SmartAdvisor matching tool can help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and your goals. Then the program will narrow down your options to three fiduciaries who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.

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